Jurgens Bauer’s Coffee Comments

While I’m not ringing a bell and calling for a major top in the coffee market, I think Tuesday’s action looked a lot like the life guards clearing the pool in preparation for adult swim time. Regular readers will note that I called for such an opportunity to get short and sell into expected strength yesterday (nothing like tooting your own horn, but hey even a broken clock is right twice a day). I hope that some of you followed my advice as prices did drop off in NY once 135 was reached in December. Next on the agenda will likely be stop hunting underneath, first at 130.50-130.00, then beneath 128.

click on the chart to enlarge
Coffee Futures
Should prices respond to such a down move and begin to drop sharply from liquidation pressure I strongly compel you to consider using such action to first cover shorts then begin buying coffee. In fact, I’m almost of the opinion that you should use major weakness to buy in earnest (with both hands and feet), but a lot hinges upon the response (by commercials and funds) to such pressure. My reasoning is that this market still looks good overall and headed higher. It is not one of those “freeze” situations which prompts a blastoff with no second chance to buy. Rather I believe that historically when coffee has provided a good bull market (one that is long term and steady) it “shakes the trees” (once and awhile) to rid itself of weak handed longs. I steadfastly believe that this is potentially one of those times. (And I can identify with getting “shaken out,” because as a floor trader I admit to having weak hands when it comes to holding a position).
Month end is also just around the corner, so it will indeed be interesting to see what develops over the next few days. The funds will likely want to add to their aggressive long position prior to then, and that anticipated response should come into play. So weakness should be short lived and be considered as a buying opportunity.
For those interested, I flipped my long call spreads turning it into a short call spread. I also bought a small position in Dec put spreads. Yes, I also day traded futures from the short side, but didn’t get out on the early weakness and ended up taking a small loss. I’m short, but now looking to use a good drop to cover and get long. A move below 130 should serve to jeopardize weak handed longs and cause liquidation stops to be elected. There are probably more below 128.
click on the chart to enlarge
Coffee Futures
Am I a big bear on coffee? No! The market is correcting.
NY December is currently 129.80 bid, offered at 129.95. The high for Dec so far is 131.95, the low 129.80, so prices are looking sharply lower this morning.
Dec/March is running 3.65/3.60
Trend: Up/Sideways
Support: 128.75-45, 127.40-15,
Resistance: 131.35, 132.20, 133.25, 134.30-50, 136, 140?
Jurgens Bauer
trading floor: (212) 748-3898
cell: (973) 652-4694


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